Proton Impoverishing Malays(ians too)

By Syed Akbar Ali

Here is an interesting news report quoting Nadzmi Salled, Proton’s Chairman. I have truncated it.

KUALA LUMPUR, Malaysia

Chairman Mohamad Nadzmi Salleh said selling Proton to local entrepreneurs would better prepare it for industry liberalization and ease the government's burden of having to protect the car industry with financial help and other privileges.

Although Malaysia has cut import taxes, it still has high taxes on locally assembled foreign cars and privileges are given to national carmakers.

"During my time, our market share was 74 percent. It has now eroded and at one stage was below 20 percent but it shouldn't slide below 30 percent"

He said the company's survival would depend on its ability to bolster exports, which remained below 10 percent of its total sales.

Proton is in talks with India's Hero Group for a small car project, targeting a huge market of motorcycle riders migrating to cars, he said but declined to give details.

Mohamad Nadzmi also defended some level of government assistance to Proton, saying it deserve incentives for the billions of dollars of investment it made to develop the auto industry.

I think we have been missing the point entirely. We do not need a Proton per se. 1stly, we need industries, run by Bumiputras especially, (obviously because of the mengurangkan jurang perbezaan ekonomi factor which still has not been solved) which can compete in the open market without the crutches.

2ndly whatever good deeds we set out to do, they must NOT burden the man in the street. The public must not bear the cost of our good intentions. Civilisations have been destroyed before because of very good intentions.

And 3rdly, it is entirely possible to achieve 1 above without suffering 2. More thinking is required.

Proton controlled 74% market share in the 90s because it was heavily protected. There was no Perodua either (Perusahaan Otomobil Kedua) which by the way has now become Perosatu. They outsell Proton, so they are no more No. Dua but No. Satu. So change name lah – Perosatu.

In the 90s as a banker I was directly involved in the financing of Perodua’s first Kancil plant near Rawang. At that time the show was run by UMW. The Kancil had no chassis frame. It was entirely welded from stamped steel panels. Before they were stamped, the flat steel sheets needed to make one Kancil could almost fit into a large suitcase.

After all the hype and expenditure over Proton, here was our second car plant putting up a manufacturing plant on a shoestring. The financing was small by the standards of the billion Ringgit size loans of the roaring 90s. I was impressed.

But after 25 years I think our experiment with over protecting the car industry should come to an end. There can be any number of Protons and Peroduas and Perosatus but please end all the unnecessary protection, the high import duties, excise taxes, AP requirements and so on which make our cars the most expensive tin cans in the world..

I think it is high time the prices of automobiles becomes a major election issue in this country. Our people, especially the Malays. are being impoverished just to keep our protected car industries going. It is just not worth it any more.

So what if 120,000 people are tied into the Proton supply chain? 28 million other people are being impoverished to keep this inefficient supply chain afloat.

Mohamed Nadzmi has said some brave things and I hope he really means what he says. But don’t just be eyeing Proton and then go behind the scenes and ask the Government to extend the protection, the AP regime, the excise duties etc which burden the Malays(ians).

There is such a thing as urban poverty now. For example, people earning RM2000 a month or less in Kuala Lumpur can be considered poor.

The DBKL is screwing up Kuala Lumpur big time with their land approval delays, zoning confusion and corruption. The net result is land prices and the subsequent cost of housing in Kuala Lumpur is going through the roof.

Add to this the fact that a tin can local car (I know, we got airbags) can cost RM50,000 or more (when a Toyota Camry minus taxes, duties and APs can cost under RM70000) simply means that two thirds of a RM2000 wage earners income goes towards paying for the housing and the car.

The car problem can be fixed almost overnite. Just allow Nadzmi to take over Proton but remove all the taxes and duties on the car industry. And please get rid of the APs too. This will see a significant drop in car prices and add more to the poor Malay(sians) disposable monthly income.

Then at least the poor guy can take his kids out on the weekends, spend more quality time with the family, buy the wife some new shoes etc. Better family harmony, more happiness in the family, better for the community and the country. GNP will go up certainly. People will be happy. They will vote wisely too.

The Government can continue assisting Proton but not through the showroom. Meaning the Government can give Proton tax exemption, special status etc but the prices of their cars in the showrooms cannot be protected anymore. That must be market prices.

Is the Gen 2 really worth RM45,000? I doubt it. Is the Perdana really worth RM95,000? That is a straight NO.

Proton has been trying to break into the world market. So far it has not been very successful. The answer is simple : technology. Our cars are basic. For the same price other car manufacturers are providing safer and higher quality cars with a lot of features and gizmos attached.

Now Proton is looking to JV with Hero of India. Werent there plans to JV in Egypt, Turkey and places like that too? India is still a wild country. If you are not Indian, don’t do the chappati ok. It may just not be your cup of thairu. You may get your tongue twisted too.